The 1st U.S. Circuit Court of Appeals sent legal questions about whether lawyers can use the Massachusetts attorney’s lien statute to collect money for patent prosecution work to the Supreme Judicial Court of Massachusetts.
If the state Supreme Court does rule that lawyers can attach a lien to patent work, the 1st Circuit wants to know if the lien survives when the party that hired the lawyer sells the patent or patent application.
The legal battle between Ropes & Gray and a former client, advertising software company Engage Inc., for payment for patent work began shortly after Engage’s June 2003 bankruptcy filing. In re Engage Inc., No. 03-43655 (Bankr. D. Mass.)
According to the 1st Circuit opinion, Boston-based Ropes & Gray claimed that Engage’s estate owed it $108,737.11 for patent prosecution work performed in
2002 and 2003 and secured by an attorney’s lien. The law firm also made an unsecured claim for $49,517.37 for corporate licensing work it performed in 2003. In Re Engage Inc: Ropes & Gray v. Jalbert, No. 08-1257 (1st Cir.)
In 2004, the bankruptcy court agreed with the case’s liquidating supervisor that the Massachusetts attorney’s lien statue did not apply to patents and patent applications.
Ropes & Gray appealed to U.S. District Court for the District of Massachusetts and asked the court to certify the question to the state Supreme Court. In re Engage Inc.: Ropes & Gray v. Jalbert, No. 4:07-cv-40270 (D. Mass.) The district court upheld the bankruptcy court’s ruling, and Ropes & Gray appealed to the 1st Circuit.
In an Oct. 6 ruling, Chief Judge Sandra L. Lynch noted that the Supreme Judicial Court hasn’t decided whether the lien statute applies to patent work or whether the lien would attach to money gained by selling the patents or patent applications.
Lynch wrote that the Supreme Judicial Court was the appropriate body to answer such questions because the decision will have implications beyond the involved parties and may involve public policy questions. She also said the case presents a “close and difficult legal issue.”
“While it is evident that the [Massachusetts] legislature intended to expand the applicability of the lien beyond court and court-like adversarial proceedings, it is also likely that it intended some limit on the scope of the statute,” Lynch wrote.
In 1945, the Massachusetts legislature amended the statute to apply the attorney’s lien statute to state and federal administrative proceedings as well as court proceedings.
Ropes & Gray bankruptcy and business restructuring group partner Ross Martin said a favorable decision by the state¹s Supreme Court would make it “easier for entrepreneurs to get legal representation.”
“It’s exactly the same principal as a lien mechanics have when they work on your car or builders have when they work on your house,” Martin said.
“Someone has made something more valuable for you, in this case by getting a patent, and they should be paid for that.”
According to the opinion, Ropes & Gray argued that the attorney’s lien statutes of New York and Minnesota have been interpreted “in accordance with Ropes & Gray’s arguments’ even though the statutory language is “very different.” Hedman, Gibson & Costigan v. Tri-Tech Sys. Int’l Inc., No. 92 Civ. 2757 (S.D.N.Y.); Schroeder, Sigfired, Ryan & Vidas v. Modern Elec. Prods. Inc., 295 N.W. 2d 514, 515-16 (Minn. 1980).
Andrew Schwartz, an attorney for the liquidating supervisor in the bankruptcy case and head of the bankruptcy and restructuring group at Boston’s Foley Hoag, said the liquidating supervisor in Engage’s bankruptcy case believes the attorney lien statute doesn’t apply to patent prosecution work.
Schwartz said the statute isn’t applicable because a patent is not a cause of action, counterclaim, claim, judgment, decree or other order within the meaning of the statute.
“There’s no question the statute can apply to some administrative Proceedings, but it does not apply to this particular form of proceeding,” Schwartz said.
The Boston Patent Law Association weighed in on the case with an amicus brief supporting Ropes & Gray’s position.
Allan Rugg, a shareholder at Boston intellectual property boutique Wolf, Greenfield & Sacks and a co-author of the amicus brief, said the patent association is pleased with the 1st Circuit’s decision to certify the questions to the Supreme Judicial Court.
“We welcome the resolution of the important issue of whether lawyers engaged in patent prosecution should enjoy the same protection for the payment of their fees that is extended to practitioners in other fields,” Rugg said.